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Trade War with Canada? Not So Fast.
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Well, there he goes again. Donald Trump is picking fights with other countries. He won’t be happy until the whole world is on fire, will he? North Korea is one thing, but Canada? Really? If we go to war with Canada, where will Kevin Smith make his terrible movies?
So what are we talking about? Well, ever since Kevin Smith started smoking pot, his films have been total crapola… No, not that. Yesterday, the US government slapped new tariffs on Canadian lumber imports. There’s an overall 20 percent tariff, and then five specific companies are getting countervailing duties of between 3.2 percent and 24.12 percent.
Okay, so what’s going on here? The most important thing you need to know is that this lumber dispute is not new. For decades, the US lumber industry complained about unfairly low stumpage fees on Canadian public-owned land, claiming that the low fees amounted to a subsidy. The US Commerce Department agreed and tried to impose duties on Canadian lumber. That prompted the Canucks to complain to NAFTA and WTO dispute settlement panels, which ruled against the US.
That all climaxed in a 2006 ruling ordering the US to refund Canada $5 billion in import duties. After that, we worked out a deal, the Softwood Lumber Agreement. However, that agreement expired in October. And right on cue, the US Lumber Coalition announced it was initiating trade cases against the Canadians. Fast forward to this week, when the US slapped countervailing duties on Canadian softwood imports.
But this isn’t some new fight that Trump decided to pick out of nowhere. This is an ongoing dispute. And these duties, unlike, say a 20 percent across the board tariff, makes use of existing law, and may be legal under certain internal trade rules.
So what happens now? Canada will file a complaint to the WTO and NAFTA, and there will be a big, long litigation process. But sorry, if you’re looking for a trade war, this ain’t it.
This is a preview from this morning’s Daily Shot newsletter. Subscribe here free of charge.
Published in General
Looks like I clicked on Huffington Post by accident.
Yes, you’d think that …. unless you read beyond that point.
It seems like this ought to be a simple matter to reconcile. Both governments should agree that instead of selling the rights to harvest various parcels of timberland at pre-set prices, the harvesting rights will be auctioned to the highest bidders. Then everyone will know that the harvesting rights ARE selling at market prices, and are not subsidized.
I read that this tariff was in response to the Canadian refusal to remove duties on US milk.
Was that not worth mentioning?
Let’s hope that negotiations will bring us to the end of Canadian duties on milk as well as American price supports for milk.
I dont understand the problem with cheap(er) lumber… Softwood lumber is primarily used in construction of wood frame buildings. (like single family homes) Wouldn’t making those cheaper to build help create jobs in the construction industry? Wouldn’t those jobs be in America (hopefully) staffed by Americans? The cheap lumber could create far more jobs in American than it does in Canada.
Right. It’s not a problem for us. It’s a problem for the US Lumber Coalition.
By the way, as a free trader, I can’t help but point out that this is the same dilemma with all protectionism. It’s claimed it’s for the greater good, but it really harms the many for the sake of the few.
Well, of course it could be that Trump just doesn’t like Canada’s smug, pretty, gonad-free, mansplaining Prime Minister.
Build the wall with Canadian lumber, 20% off.